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Nov 24, 2021
[4 min Read]
Kulicke & Soffa Industries, Inc., (KLIC $57.07) reported September quarter results that were better than initial expectations and guided the December quarter to be above street estimates as the core wire bonder business is performing a bit better than expected given the drop in IC unit volume growth. KLIC is seeing upside to other segments such as high-end LED, advanced packaging tools for thermal compression bonding, and growing opportunities in the automotive segment with power management chips and battery assembly applications. Over the next couple of years the company's LED pick and place tool could drive revenue in this segment to be over $300 million from around $80 million in FY2021 establishing KLIC with another major growth driver. The new LED tool addresses more applications besides just final placement including sorting, binning, and adjusting the LEDs on the substrate and is expected to drive much broader customer adoption outside of the initial customer who we believe is Apple. We would be adding to positions of KLIC at current valuations with a move to the $105 range of 15x our FY2022 pro-forma EPS of $6.34 plus the $11.63 in net cash.
The company reported September (Q4FY2021) revenue of $485.3 million up 14.4% sequentially and up 173% versus last year's September quarter and in-line with the company's pre-release of results on November 1, 2021. Revenue was better than initial estimates driven by strength in general semiconductor, memory and LED revenue coming in at the high end above $80 million for the year. Gross margin was 47.7% up from the 46.1% reported last quarter driven by volume, mix, cost reductions, and ASP increases. Operating profit was a record 31.9% up from 28.4% reported last quarter and the 13.0% reported in last year's September quarter. Pro-forma EPS was $2.17 up from the $1.87 reported last quarter and the $0.35 reported in last year's September quarter and in-line with the pre-released EPS estimate of $2.15-$2.17.
KLIC generated $123 million in cash flow from operations and total cash increased $105 million sequential to $740 million or $11.63 in net cash per share up from the $10.00 in net cash reported last quarter as KLIC continues to be a cash generating machine. Increasing cash by $4.15 per share over the last twelve months
KLIC's reported FY2021 revenue of $1.52 billion up 144% in versus FY2020 and better than the company's initial $1.50 billion estimate driven by much higher IC unit volume growth in 2021 driving the company's core wire bonder business significantly higher servicing the 5G, EV's, and increasing content and complexity of each IC. Strong growth in LED displays, service and the automotive recovery also helped revenue growth for the year. Operating income was $412.4 million or 27.2% of revenue in FY2021 up from the 9.4% reported in FY2020 driving huge EPS growth of 482% to $6.14 propelled by the increase in revenue and tight operating expense control.
The company guided December quarter (Q1FY2022) revenue to be $460 million down 5.2% sequentially and up 73% versus last year and better than the street's $411.7 million estimate driven by another strong LED display quarter and less of a decline in the core wire bonder business than initially anticipated. Gross margin should be around 47% down slightly from the 47.7% reported last quarter. Pro-forma EPS should be $1.88 +/- 10% down from the $2.17 just reported and up from the $0.86 reported last year and better than the street's $1.54 estimate driven by the higher revenue and gross margin.
KLIC did not update the $1.5 billion revenue estimate for FY2022 (flat with the $1.52 billion just reported in FY2021) but did suggest we might now have a bit of upside to that number as the core wire bonder business declines a bit in calendar 2022 as overall unit volume growth slows from over 20% in 2021 to around 8-10% in 2022. This decline of around $150-$200 million in core wire bonding revenue in 2022 will be offset by growth in the company's other segments of high-end LED, advanced packaging focused on thermal compression bonding with a large OEM who we believe is Intel, new opportunities in automotive battery assembly and power management segments with customers such as Tesla and increased service revenue producing flat revenue for the year, or as we are forecasting, moderate growth for FY2022 to near $1.6 billion. Expanding gross margin and operating leverage should produce higher EPS on flat revenue in FY2022. We are now forecasting pro-forma EPS of $6.34 in FY2022 up from the $6.14 just reported.
We would be adding to positions of KLIC at current valuations with a move to the $105 range of 15x our FY2022 pro-forma EPS of $6.34 plus the $11.63 in net cash. In the near term the core wire bonder business will drop a bit in 2022 but then probably start to grow again in 2023 as increased IC unit volume growth drives up the core business again. The ramp of the LED display business from $80 million to over $100 million in 2022 and the ramp up of new advanced packaging products, in the back half of 2022 in the thermal compression bonding segment, which should double from the $20 million range to over $40 million in 2023 and $80 million in 2024, and growing automotive and battery assembly revenue should allow KLIC to show slight revenue growth in 2022 and higher revenue growth above $1.5 billion in 2023 and 2024 pushing the stock to over $100.